Greece Plans Another Bond Offering

By Niki Kitsantonis

July 9, 2014

ATHENS — Three months after returning to international bond markets following a long exile, Greece said on Wednesday that it was planning to sell bonds again in an effort to capitalize on the growing demand for short-term euro zone debt.

After a successful issue of five-year bonds in April, Greece said it would sell three-year bonds “in the near future.” A statement by Greece’s Finance Ministry provided no details about the size or exact timing of the debt offering, but Greek news media said the sale, which would begin Thursday morning, would try to raise 2.5 billion to 3 billion euros, or $3.4 billion to $4.1 billion, and that the bonds would pay an interest rate of less than 3.5 percent.

Greece plans to use the proceeds from the sale, which will adhere to British law, to finance the repayment of €6 billion of debt maturing next month.

The fresh call for funds comes as investors looking for better returns flock to the higher-paying debt of countries like Greece. This month, Portugal and Ireland, both of which recently emerged from their international bailouts, made new forays into capital markets.

Analysts said that three-year bonds were not common but that the choice of such debt was in keeping with Greece’s desire to build demand for its short-, medium- and long-term debt. “The Greeks are trying to build confidence along the yield curve,” said Mujtaba Rahman, a director at the London-based Eurasia Group. “The three-year bond issue speaks to that strategy.”

But the new bond offering is not without risks, according to Mr. Rahman, who described it as a “double-edged sword.”

“It allows the government to claim the domestic crisis is over, but it will reduce creditor appetite to extend Greece debt relief later this year,” Mr. Rahman said, referring to talks with international creditors over lightening the country’s huge debt burden, which is expected to be about 174 percent of gross domestic product this year.

The new Greek offering also comes as inspectors representing the country’s troika of international lenders — the European Commission, the European Central Bank and the International Monetary Fund — returned to Athens for a new review of the country’s efforts to overhaul its economy and public administration.

Greece’s new finance minister, Gikas Hardouvelis, who was installed last month as part of a cabinet reassignment by Prime Minister Antonis Samaras, is set to hold his first meeting with troika inspectors on Thursday.

The talks are expected to focus on the overhauls Greece has agreed to push through in return for more rescue funding, like transforming the country’s dysfunctional tax collection system, and the planned partial privatization of the electricity utility, which has prompted worker strikes, power cuts and calls by the political opposition for the changes to be put to a referendum.

Another issue expected to dominate talks is a rash of rulings by Greek courts that overturn measures dictated by the troika, like layoffs of civil servants and cuts to salaries and pensions. A failure to put those measures into effect is expected to punch a hole in Greece’s finances, and inspectors for the international creditors are likely to demand that savings be found elsewhere.

But, according to Mr. Rahman, a successful bond issue could be used as “a bargaining chip” by the government to push back on the overhauls sought by the troika.

Underlining their opposition to the proposed overhauls, Greek civil servants walked off the job on Wednesday, disrupting public services at hospitals and other institutions.

Although Greece is expected to return to growth this year after a crippling six-year recession, the impact of austerity measures has pushed unemployment up to around 27 percent and decimated incomes.

International creditors have provided Greece with two bailouts worth a total of €240 billion since 2010, meting out the loans in installments in exchange for the painful economic measures.

A version of this article appears in print on , on Page B2 of the New York edition with the headline: Seeing Demand for Its Debt, Greece Plans Bond Offering. Order Reprints | Today’s Paper | Subscribe